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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1: Summary of Significant Accounting Policies (Continued)
parties other than the parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes
disclosure requirements that clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after
December 15, 2008 and will be adopted by HP in the first quarter of fiscal 2010. HP is currently
evaluating the potential impact, if any, of the adoption of SFAS 160 on its consolidated results of
operations and financial condition.
In March 2008, the FASB issued SFAS No. 161, ‘‘Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133’’ (‘‘SFAS 161’’). SFAS 161 applies to all
derivative instruments and related hedged items accounted for under SFAS No. 133, ‘‘Accounting for
Derivative Instruments and Hedging Activities’’ (‘‘SFAS 133’’). SFAS 161 requires entities to provide
greater transparency about how and why an entity uses derivative instruments, how derivative
instruments and related hedged items are accounted for under SFAS 133 and its related interpretations,
and how derivative instruments and related hedged items affect an entity’s financial position, results of
operations and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008 and will be adopted by HP in the second quarter of
fiscal 2009. HP does not expect the adoption of SFAS 161 to have a material effect on its consolidated
results of operations and financial condition.
In May 2008, the FASB issued SFAS No. 162, ‘‘The Hierarchy of Generally Accepted Accounting
Principles’’ (‘‘SFAS 162’’). SFAS 162 identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements of nongovernmental entities
that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy).
Statement 162 became effective November 15, 2008. HP does not expect the adoption of SFAS 162 to
have a material effect on its consolidated results of operations and financial condition.
In May 2008, the FASB issued FSP Accounting Principles Board (‘‘APB’’) 14-1 ‘‘Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)’’ (‘‘FSP APB 14-1’’). FSP APB 14-1 requires the issuer of certain convertible debt
instruments that may be settled in cash (or other assets) on conversion to separately account for the
liability (debt) and equity (conversion option) components of the instrument in a manner that reflects
the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning
after December 15, 2008 on a retroactive basis and will be adopted by HP in the first quarter of fiscal
2010. HP is currently evaluating the potential impact of the adoption of FSP APB 14-1 on its
consolidated results of operations and financial condition.
In June 2008, the FASB issued FSP Emerging Issues Task Force (‘‘EITF’’) 03-6-1, ‘‘Determining
Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.’’ FSP
EITF 03-6-1 clarifies that share-based payment awards that entitle their holders to receive
nonforfeitable dividends or dividend equivalents before vesting should be considered participating
securities. HP has some grants of restricted stock that contain non-forfeitable rights to dividends and
will be considered participating securities upon adoption of FSP EITF 03-6-1. As participating
securities, HP will be required to include these instruments in the calculation of earnings per share
(EPS), and it will need to calculate EPS using the ‘‘two-class method.’’ The two-class method of
computing EPS is an earnings allocation formula that determines EPS for each class of common stock
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